Squeezing a profit from the wreckage in Iraq
The permanent military domination of the world is an expensive business. Last September, having already spent $79 billion in Iraq and Afghanistan, George W. Bush asked Congress for an additional $87 billion to sustain the effort another year. Within hours, the White House admitted that even this was a lowball estimate. L. Paul Bremer, Bush's proconsul in Iraq, said the cost of reconstructing that nation alone was "almost impossible to exaggerate." In total, military spending next year will likely reach half a trillion dollars, more in real dollars than was spent even in 1968, at the height of the Vietnam War.
Although many of the dreaming geomancers in his administration had foreseen the Iraq war as a "cakewalk," Bush himself has always been more cautious in describing his vision of America's military commitments. He has called Iraq the "central front" in "a different kind of war, fought on many fronts in many places," and thus far he has refused to estimate when this larger war might end or even to provide criteria for victory. Instead, he has said that the struggle will be "lengthy" and will "require sacrifice" on the part of the American people. In short, the White House has committed the American people to financing an expensive, perpetual war with fronts in Iraq, Afghanistan, and countries yet to be announced. Even those few politicians who objected to the Iraq invasion now argue that we must "finish the job." The deed has been done. The money must be spent.
And so, for the private contractors that increasingly make up the infrastructure of our armed forces, fortune has arisen from tragedy. During the first Iraq war, in 1991, one in a hundred American personnel was employed by a private contractor. In the second Iraq war, that ratio is closer to one in ten. The Washing ton Post reports that as much as one third of the rapidly expanding cost of the Iraq war is going into private U.S. bank accounts.
The original point of this massive outflow of federal dollars was to save money. In Donald Rumsfeld's vision, privatization would bring the unbending discipline of the marketplace to bear on war itself. In 1995, well before his return to Washington, Rumsfeld presented to America his "Thoughts from the Business World on Downsizing Government," a monograph informed by his experience as both a White House chief of staff and defense secretary (under Gerald Ford) and a CEO of two large American corporations (General Instrument Corp. and G. D. Searle). "Government programs are effectively insulated from the rigors of the marketplace, and therefore are denied the possibility of failure," he wrote. "Sometimes, nothing short of outright privatization can restore the discipline of a bottom line."
Now Rumsfeld's vision of privatized warfare is coming to fruition and the bottom line has yet to be plumbed. Depending upon how much the American people are willing to sacrifice, the potential for private profit in U.S. war making has become, to borrow a phrase, almost impossible to exaggerate. The war has been a bonanza, for instance, for both Halliburton, the energy holding company, and for Bechtel, the number-one construction contractor in the United States. Dick Cheney was CEO of Halliburton from 1995 to 2000. George Shultz was Bechtel's president for eight years before becoming Ronald Reagan's secretary of state. Last March the U.S. Army Corps of Engineers awarded the Kellogg Brown & Root subsidiary of Halliburton a contract, expandable up to $7 billion over two years, to provide for all of the logistical and maintenance needs of the U.S. forces in Iraq. At the same time, the U.S. Agency for International Development gave Bechtel an initial contract of $34.6 million to rebuild Iraqi power-generation facilities, electrical grids, water and sewage systems, and airports. Bechtel will bill the U.S. government for expenses up to $680 million over eighteen months. These open-ended contracts did not come about through competitive bidding but through backdoor deals guided by the Bush Administration. Oversight is virtually nonexistent.
Whatever else may or may not have changed after 9/11, one thing has become clear: munitions making and war profiteering have supplanted the energy and telecommunications deals pioneered by Enron and WorldCorn in the late 1990s as the most efficient means for well-connected capitalists to engorge themselves at the public trough. To call these companies "private," though, is mere ideology. Munitions making in the United States today is not really private enterprise. It is state socialism.
When a political problem becomes a business problem, a shift occurs. Responsibility is displaced and consequences diffused. This dislocation of responsibility has roots in a much older phenomenon, in which empires sought to "outsource" the enforcement of their political will. The British had their Gurkhas, Sikhs, and sepoys; the French, their Foreign Legion; the Dutch, their Ambonese; the Russians, their Cossacks; and the Japanese, their puppet armies in Manchuria, China, Indonesia, and Burma. Replacing homeland soldiers with local cannon fodder and setting one indigenous ethnic or religious group against another have often made the policing of a subordinate people easier and less expensive.
The "sepoy strategy" once involved training "native" troops to serve in regiments commanded by British officers or in imperial Indian regiments thought to be loyal to the British crown, which were normally composed of Sikh and Gurkha mercenaries. (The word "sepoy" probably derives from the Urdu word for "horseman" or "soldier.") In 1857, at the time of the Sepoy Mutiny - which Indian nationalists call their "first war of independence" - Britain deployed an army of 300,000 soldiers in India, 96 percent of whom were sepoys. The fact that they proved not to be loyal to Britain suggests one of the major potential pitfalls of this approach.
In 1857, when the British introduced one of the earliest versions of the Enfield rifle, the bullets were rumored to be soaked in grease made from animal fat, including fat from cows and pigs. Cows are sacred to Hindus; pigs are repulsive to Muslims. One of the idiosyncrasies of the ammunition for this particular rifle was that a twist of paper attached at one end had to be bitten off before the round could be used. Stories quickly spread among the sepoys that the British were trying to humiliate them by forcing them to violate religious taboos. So when one British commander ordered his troops to bite the bullet, a soldier shot him.
Revolt erupted, and the British struck back with savage brutality. Captured sepoys were bayoneted or sewn into the hides of pigs or cows and fired from cannons. Much as when the Roman Republic suppressed the Spartacist revolt, the road from Kanpur to Allahabad was lined with the corpses of Indian soldiers who had been hanged. England ended the authority of the East India Company, which had employed the sepoys and their officers, and for the next ninety years ruled the country directly as a crown colony. The Indian regiments were abolished and their soldiers absorbed into larger formations that included Englishmen. The operation of artillery was restricted to British soldiers. With these changes, the British in effect gave up their role as merchants in India and became the unwelcome occupiers of a hostile land.
The Americans tried their hand at sepoyism in Vietnam in 1962. They sent Green Berets into the southern highlands to train the Montagnards - mountain people, ethnically distinct from the Vietnamese - and to organize them into a Civilian Irregular Defense Group. Generally speaking, the Montagnards contributed little to the war effort, and their outposts were easily overrun by the Vietcong whenever it served their purposes to do so.
In Afghanistan between 1979 and 1989, the CIA supplied mujahedeen ("freedom fighter") groups with more than $2 billion worth of light weapons, including Stinger antiaircraft missile launchers, and offered instruction in how to use them against the Soviet forces then occupying the country. The Americans were uninterested in the religious beliefs, political loyalties, or attitudes toward the West of those they were recruiting, training, and arming. Once the Soviet Union was defeated, the Americans abandoned Afghanistan to its fate, and the mujahedeen, mainly Islamic fundamentalists, turned against the United States. The deployment of thousands of American military forces to Saudi Arabia, location of Islam's two most sacred sites, and U.S. support for Israel only increased their resentment. Muslim militants retaliated throughout the 1990s, attacking New York's World Trade Center in 1993, U.S. military apartment towers in Saudi Arabia in 1996, American embassies in Kenya and Tanzania in 1998, and the Navy destroyer USS Cole in 2000. It is possible to think of the suicidal attacks of September 11 as a contemporary version of the Sepoy Mutiny.
After 9/11, 1, the United States sent CIA agents to Afghanistan with millions of dollars to bribe warlord armies to reopen the civil war in which the Taliban had previously defeated them, promising them air support in their new offensive. The warlords, with a bit of help from the United States, thus overthrew the Taliban government and soon returned to their old ways of regional exploitation. The propaganda apparatus of the Pentagon claimed a stupendous U.S. victory in Afghanistan, but, in fact, leaders of the Taliban and Al Qaeda escaped and the country has become an even more virulent breeding ground for terrorists. Also, in the first year after Afghanistan's liberation, the production of opium, controlled by America's warlord allies, increased eighteenfold, from 185 to 3,400 tons. Another victory for private enterprise.
A related aspect of sepoyism is the arming and training of U.S. satellites and dependencies, which is a little bit like a corporation turning to one of its subsidiaries to fulfill its labor requirements. Ever since 1993, when the mutilated body of Sergeant Randy Shughart was televised while being dragged through the streets of Somalia's capital, Mogadishu, causing President Clinton four days later to announce the withdrawal of our forces from that country, the Pentagon has tried to avoid American casualties that might turn the public against its plans. The death of foreign soldiers does not make news, and so the intent is to prepare foreign soldiers for joint operations under our command. As President Bush put it in a speech on March 11,2002, "We will not send American troops to every battle, but America will actively prepare other nations for the battles ahead."
Particularly since the end of the Cold War, the military has developed close relationships with myriad governments and officer corps in what used to be called the Third World and has put immense effort into military-to-military training programs. During the 1990s leaders in both political parties concluded that many foreign-policy goals could better be fostered through such contacts than through traditional economic and diplomatic ties. One program for implementing such policies, the State Department's International Military Education and Training Program, has increased fourfold since 1994. In 1990 it was offering military instruction to the armies of 96 countries; by 2002 that already impressive number had risen to 133 countries. There are 189 countries in the United Nations, which means that this single program "instructs" militaries in 70 percent of the world's nations.
We train approximately 100,000 foreign soldiers each year - most of them officers who then can pass on American methods to their troops. In 2001 the U.S. military taught 15,030 officers and soldiers in Latin America alone. The Pentagon does this either by bringing them to one of the approximately 150 military educational institutions in the United States or by sending military instructors, almost always Army Special Forces, to the countries themselves. The "war on terror" has only accelerated these programs, in many cases replacing the "war on drugs" as a justification, with no discernible difference in pedagogy. The United States claims that such training promotes American values. There are other benefits as well. The close contact between American military instructors and foreign officers and soldiers, for instance, provides the United States an inside track in weapons sales. The Defense Security Cooperation Agency, headed by a lieutenant general and an integral part of the Department of Defense, operates the Foreign Military Sales Program, which is our government's preferred method of selling U.S. defense equipment, purchased from American manufacturers, to foreign governments. The value of government-to-government arms sales rose 10 percent in 2001, to $13.3 billion. The Pentagon has, since 1991, been by far the largest single salesman of munitions on earth. From 1997 to 2001 it exported $57.8 billion in arms, more than three times as much as the United Kingdom, the second-largest exporter.
Sepoys are useful, and sometimes even profitable, but the real money is in government contracts. Indeed, military contractors are among the most profitable businesses in the country today. The largest contractors are the Vinnell Corporation of Fairfax, Virginia, which on July 2 received a $48 million contract to train a new Iraqi army; Military Professional Resources, Inc. (best known by its acronym, MPRI), located in Alexandria, Virginia, and owned by L-3 Communications; Kellogg Brown & Root, the Texas company that, long before its merger with Kellogg, bankrolled Lyndon Johnson's political career and that is today a subsidiary of the Halliburton Corporation; DynCorp of Reston, Virginia, which became notorious during the late 1990s when it was discovered that some of its employees in Bosnia were keeping underage women as sex slaves and then selling them elsewhere in Europe; Science Applications International Corporation of San Diego, whose top five executives made between $825,000 and $1.8 million in salaries in 2001 and held more than $1.5 million worth of stock options each; BDM International of Fairfax, Virginia; Armor Holdings, Inc., of Jacksonville, Florida; Cubic Applications, Inc., of Lacey, Washington; DFI International (originally Defense Forecasts, Inc.) of Washington, D.C.; and International Charter Incorporated of Oregon.
These are not small organizations. DynCorp has 23,000 employees; Cubic, some 4,500; and MPRI, about 700 full-time staff members plus a roster of 10,000 retired military personnel who are on call for contract assignments. One authority on these new mercenaries, Professor Deborah Avant of the Elliott School of International Affairs at George Washington University, estimates that the revenues of the private military companies, which totaled $55.6 billion in 1990, will rise to $202 billion by 2010, making the industry one of the fastest growing in America. The companies even have their own trade group, the International Peace Operations Association - a name George Orwell would have cherished.
The Vinnell Corporation, a subsidiary of the large defense conglomerate Northrop Grumman, was created by retired American military officers and, since 1975, has been licensed by the government to train the Saudi National Guard, the 100,000-man force used to protect the monarchy and to serve as a counterweight to any threat from the regular armed forces. Last May 12, Al Qaeda terrorists blew up three foreign housing compounds in Riyadh, Saudi Arabia, killing thirty-four, including eight Americans. One of the main targets was the apartment building of some seventy Vinnell employees. Over the years Vinnell has constructed, run, staffed, and written doctrine for five Saudi military academies, seven Saudi shooting ranges, and a state-operated health-care system, while training and equipping four Saudi mechanized brigades and five infantry brigades. Saudi Arabia has, in turn, funneled hundreds of millions of dollars into major defense corporations to equip these forces, which briefly saw action in the first Gulf war by recapturing the Saudi town of Khafji, on the Kuwait border, from the Iraqis.
DynCorp was hired to provide personal protection for President Hamid Karzai of Afghanistan and will take over the training of the Afghan army once the Green Berets leave the country. DynCorp also "trained" the Haitian police after the United States intervened there militarily in 1994. This year it won the lucrative contract to provide a thousand advisers to help create Iraq's new police department, judicial branch, and prison system. The contract, the estimated value of which could be as high as $50 million for the first year, was one in a series the Pentagon exempted from the U.S. government's usual requirement for "full and open competition." Other DynCorp operations include running the entire Air Force One fleet of presidential planes and helicopters, and the aerial spraying of defoliants on drug crops in Colombia. By 2002 it was the nation's thirteenth-largest military contractor, with $2.3 billion in revenue, 96 percent of it from contracts and subcontracts with the U.S. government.
During the 1990s the Pentagon began to contract out every conceivable kind of service except firing a rifle or dropping a bomb. As a result of its penchant for cost-plus contracts, which guarantee a profit, many new so-called base-support contractors have sprung into being. These firms have taken over base construction, maintenance, and security, so the days of G.I.'s doing guard duty and cleaning latrines have virtually disappeared.
The best-known example of this is the super-luxurious Camp Bondsteel in the Balkans, built and run by Kellogg Brown &. Root. Immediately after the American bombing campaign against Yugoslavia in June 1999, the United States seized from private owners a thousand acres of farmland at Urosevac in southeast Kosovo, near the Macedonian border. Built in just under four months, Camp Bondsteel is the largest and most expensive base constructed since the Vietnam War, costing some $36.6 million to build and approximately $180 million annually to operate.
Kellogg Brown & Root maintains the barracks, cooks the food, mops the floors, transports all supplies, and operates the water and sewage systems. Employing about a thousand former U.S. military personnel and another 7,000 local Albanians, the company delivers 600,000 gallons of water daily, supplies enough electricity for a city of 25,000, washes 1,200 bags of laundry, and cooks and serves 18,000 meals per day. The camp was so overstaffed that offices were cleaned four times a day and latrines a mere three times a day. Soldiers serving at Camp Bondsteel say the only patch missing from their camouflage fatigues is one that says, "Sponsored by Brown & Root." The company provides similar services for bases in Kuwait, Turkey, and Uzbekistan.
Camp Bondsteel is a spooky place, surrounded by an earthen berm 2.5 meters high and nine wooden guard towers. All of the trees have been removed to provide open fields of fire. Dominated by a mass of communications antennae, satellite dishes, and hovering attack helicopters, it has a six-mile perimeter and seems too large and permanent an installation merely to meet the requirements of peacekeeping in southern Serbia, a mission that President Clinton asserted would last no longer than six months and that George Bush said in his election campaign he wanted to eliminate.
As it happens, Camp Bondsteel is located astride the route of the proposed AMBO (Albanian-Macedonian-Bulgarian Oil) Trans-Balkan pipeline. This $1.3 billion project, if built, will pump Caspian Basin oil brought by tanker from a pipeline terminus in Georgia across the Black Sea to the Bulgarian oil port at Burgas, where it will be piped through Macedonia to the Albanian Adriatic port of Vlore. From there supertankers would take it to Europe and the United States, thus bypassing the congested Bosporus Straits, as of now the only route out of the Black Sea by ship, where tankers are restricted to 160,000 tons. The initial feasibility study for the AMBO pipeline was done in 1996 by Brown & Root, which updated it in 2000. Bondsteel appears to be a base camp for what University of Texas political scientist James K. Galbraith has called the "military-petroleum complex," of which Dick Cheney is assuredly a godfather.
Cheney was secretary of defense when Brown & Root first began to supply logistical services to the Army. It was his idea. In 1992, the Pentagon paid Brown & Root $3.9 million to produce a classified feasibility study on private outsourcing as a way to reduce the military's dependence on troops for basic logistics. The Pentagon subsequently added $5 million to the contract and then chose Brown & Root to implement its own plan - namely, a five-year logistics contract from the Army Corps of Engineers to work alongside G.I.'s in places like Zaire, Haiti, Somalia, KOSOVO, the Balkans, and Saudi Arabia. After Cheney became head of Halliburton in 1995, Brown & Root took in $2.3 billion in government contracts, almost double the $1.2 billion it earned from the government in the five years before he arrived. In the late 1990s Halliburton rebuilt Saddam Hussein's war-damaged oil fields for some $23.8 million - fields Cheney, as secretary of defense during the first Gulf war, had been instrumental in destroying.
Cheney brought with him to Halliburton several associates from his Pentagon days. Dave Gribbin, his former chief of staff, became one of Halliburton's leading lobbyists; and Admiral Joe Lopez, a former commander of the Sixth Fleet, assumed the post of Kellogg Brown & Root's senior vice president for governmental operations. During Cheney's term as Halliburton's chief, the company advanced from seventy-third to eighteenth on the Pentagon's list of top contractors, increasing its government contracts by 91 percent. Meanwhile, the number of Halliburton subsidiaries located in offshore tax havens increased from nine to forty-four. The company went from paying $302 million in taxes in 1998 to getting an $85 million tax refund in 1999. Cheney resigned from the company on August 16,2000, to run for vice president, but his ties did not end there. According to the White House, Cheney had an adjusted gross income for 2000 of $36,086,635, which included $4,333,500 in bonuses and deferred compensation from Halliburton. Cheney's financial disclosure statement was not his actual income-tax return but a White House press release. As vice president, Cheney continues to receive payments from Halliburton in excess of $150,000 annually in deferred compensation.
When George Washington warned in 1796 that "overgrown military establishments" are "inauspicious to liberty," he had something quite specific in mind. He feared that the United States might develop a state apparatus, comparable to those of the autocratic states of Europe, that could displace the constitutional order. Indeed, the Declaration of Independence accused the English king of having "affected to render the Military independent of and superior to the Civil Power," and the First Continental Congress condemned the use of the army to enforce the collection of taxes. These attitudes lasted about a century. With the Spanish-American War, the government began to build a military machine that by the end of the twentieth century had come to seem invincible. Now, despite warnings from Washington and Eisenhower alike, we take it for granted that the military-industrial complex is an appropriate place for high-ranking military officers to "retire," just as we take it for granted that defense executives will receive high appointments at the Pentagon. This "circulation of elites" undercuts attempts at congressional oversight of either industry or the military, and the result is an almost total loss of accountability in terms of public money spent or military actions taken.
It is hard even to remember that on the eve of World War II, our regular army was a mere 186,000 men. Now, the 1,400,000-strong "peacetime" military services, funded by a defense budget larger than most national budgets, are made up of both men and women living in a closed-off, self-contained base world that connects outposts from Greenland to Australia. The Pentagon has deployed a quarter of a million troops against Iraq while at the same time several thousand soldiers are engaged in daily skirmishes in Afghanistan, countless Navy crews are manning ships in the waters off North Korea, a few thousand Marines are in the southern Philippines assisting local forces in fighting an Islamic separatist movement with roots a century old, and several hundred "advisers" are involved in what might someday become a Vietnam-like insurgency in Colombia (and possibly elsewhere in the Andean region). We have a military presence in 120 of the 189 member countries of the United Nations, including large-scale deployments in twenty-five of them. We have military treaties or binding security arrangements with at least thirty-six countries.
This is expensive, and the United States is quite short on cash. The first Gulf war cost about $61 billion, with American allies such as Saudi Arabia, Kuwait, the United Arab Emirates, Germany, Japan, and South Korea chipping in some $53 billion, more than 80 percent of the total, leaving the United States' financial contribution a minuscule $7 billion. Japan alone contributed $13 billion. Nothing like that will happen again. Virtually the entire world is agreed that if the lone superpower wants to go off in pursuit of preventive wars, it can pick up its own tab. The Congressional Budget Office projects a federal deficit of $480 billion for next year, swelling by $1.4 trillion over ten years, on top of an already existing government debt in February 2003 of $6.4 trillion.
Not only are our armed forces seriously overstretched; we are going deeply into debt to finance them. And yet the money keeps flowing. According to White House projections, which are traditionally low, the Bush Administration expects, if reelected, to spend an inflation-adjusted $3.2 trillion on defense over its two terms - about half a trillion more than the Clinton Administration did in its two terms. By comparison, the United States spent $3.1 trillion on defense between 1941 and 1948. In real dollars, the "war on terror" will cost more than World War II.
None of this bears any relation to private enterprise, whatever else it might be called. Without the "rigors of the marketplace" only the profit remains. The biggest of all munitions companies, the Lockheed Martin Corporation, played an important behind-the-scenes role in developing support for Bush's war with Iraq. In 2002 its former vice president Bruce Jackson became chairman of a "private" lobbying organization, the Committee for the Liberation of Iraq. Charter members include George Shultz and John McCain. In fiscal year 2002, Lockheed Martin received $17 billion in contracts from the Pentagon - up from $14.7 billion in 2001 - and almost $2 billion for the design of nuclear weapons from the Department of Energy. In the year prior to the war, the company's profits rose by 36 percent.
This is the future. When war becomes the most profitable course of action, we can certainly expect more of it.
** Chalmers Johnson is the author of Blowback. His next book, The Sorrows of Empire, will be published by Metropolitan Books in January.
* Harper's Magazine, November 2003.
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